What do business leaders look for as signs of recovery in Papua New Guinea’s economy? In the second of a two-part series, Business Advantage PNG gets views from senior executives in finance, manufacturing and agribusiness.

Kina Securities’ Syd Yates

Syd Yates, Chief Executive of Kina Securities Group, believes positive market sentiment is crucial to sparking an economic rebound.

‘The factors that determine a turnaround in the economy in PNG are no different to any other country,’ he says.

‘The main one is confidence—how people do things—and that means doing positive things, such as planning. It’s a feeling.

‘Right now, there is not too much confidence around, because of headwinds facing the economy. The foreign exchange issue, for example.

‘During the election—and this is not unique to PNG—people are sitting on their hands, waiting to see what the new government will bring and its approach to the economy.

‘We won’t know about big investment decisions until the end of 2017. Having said that, the future for PNG is positive and the future is strong. It’s not all doom and gloom.

‘It is important to look at indicators that do not include the resources sector.’

‘Compared with 20 years ago, our economy is more robust and bigger, although we do have issues.’

GNP or GDP?

According to one managing director in manufacturing, it is important to look at economic indicators that do not include the resources sector. ‘What constitutes an improvement in the economy of PNG, or a recovery? I’d say, statistically speaking, an increase in GNP [gross national product, or what is produced by a country’s residents].

‘I would avoid GDP [gross domestic product, or what is produced by both residents and foreign companies], unless it was GDP with mining exports disaggregated. I don’t think we should get bogged down in statistics, though.’

‘There are several signs of an economic recovery.’

The executive argues there are several signs to look for ahead of an economic recovery.

‘It would include an increase in disposable cash, consumption and investment, whether it be by household level consumers, local businesses, or overseas investors. There would be an increase in employment and consumer discretionary spending.’

Local demand up

The executive says some of the indicators he looks at are business investment, consumers’ disposable income and cost of living increases.

‘This in turn leads to a decrease in imports.’

Employment in civil construction companies and trends in foreign direct investment (FDI) are also important.

Demand for local manufactured products is strong

There can be positives emerge from the current pressures. The executive says there has been ‘a massive increase in demand’ for locally manufactured products due to the lack of foreign currency.

‘This in turn leads to a decrease in imports.

‘But I am sure most PNG businesses would say that the foreign exchange issue is a major impediment.’

Crops

According to a chief executive in the agribusiness sector, expenditure, especially on roads, is an important indicator to watch.

He also looks at volumes and prices, noting that this year has been better than 2016 so far.

Another figure he considers important is economy-wide consumption. This especially affects retailers, he says.

When it comes to specific crops, the executive says there is limited information available about the state of this year’s cocoa and coffee crops (especially bearing in mind the impact of the coffee borer). He notes these crops are ‘important to rural cash flow.’

You can read the first part of this two-part series here.